Doctors and practice administrators do not like to admit that embezzlement happens. Fraud can occur to the best of practices. I have seen the after effects of fraud first-hand when I was hired to help clean up after a practice administrator who had sole custody of the books. She was the only person to see the money come in, deposit the checks and perform the day to day insurance billing.

While cleaning up, we found uncontested and unpaid claims stuffed in charts and denied claims in desk drawers. We found claims that were never billed to the insurance company. It was a mess. No one was looking out for the doctor’s best interests. The doctor had no idea why she was loosing money. This practice administrator was also cashing checks made out to petty cash. Needless to say, the administrator lost not only her job but now has a police record.

To guarantee that fraud would not happen again; a series of checks and balances were set into place. Two people had to check off the daily deposit. The claims were no longer the sole responsibility of one person. Billing was done by a “biller” and that biller had to report to an administrator, who reported to the doctor. The physician was kept informed of problem claims in a monthly basis.

According to the amednews.com : “Nearly 83% of 688 practice managers were affiliated at some point with medical offices where employee theft occurred, according to a survey released Nov. 5, 2010, by the Medical Group Management Assn. Nearly 45% of practice managers reported cash stolen before or after it was recorded on the books. Experts say so much cash and minimal staff to check one another’s work make small practices particularly vulnerable.”

Regrettably, embezzlement is still a problem and if no checks and balances are put into place, the practice leaves itself open to fraud and lost revenue. One way to prevent lost revenue is to hire an outside billing service. A billing service has a vested interest in getting the practice paid. Most services are paid on a percentage of the net revenue the practice receives monthly. Another safeguard is to have all payments go directly to the practice office and not to the billing office. This protects both the practice and the billing company.

The billing company should have a system where the claims and payments coming from the medical office are accounted for daily. Thus a “day sheet” can be generated for each entity to verify that nothing is missing or miscounted. Electronic Medical Records systems (EMR) have other safeguards in place, as well.

Another way to deter fraud is to screen potential employees with background checks. All candidates should have some screening done. Karen Zupko of Karen Zupko & Associates stated in her article to the America Journal of Orthopedics: “According to Donna Ploof of RHR Information Services, a company that provides background checks to a wide range of businesses, including medical practices, “one of every three applicants provides false, inaccurate, misleading, or incomplete information”.

Background checks aren’t fool proof and some of the employees who steal have been employees for years and a background check can not weed out the employee who has no “record”, However, if all the tools are in place along with utilizing an outside billing agency or auditor, you have a better chance of steering clear of fraud and theft.

Many practices like to keep their billing in the office because they like the feeling of control. A warm body of either a biller or a staff member performing billing services in the office can give practitioner a great sense of comfort.

However, quite often the benefits of outsourcing to a billing company outweigh the warm fuzzy of having a staff member carry out the billing duties. Time spent on the telephone with insurance companies, verifying that the claims actually arrived and are in process, calling on claims, appealing denials and other various calls eat up valuable time. A staff member can be on constant hold or “ignore” for minutes or hours at a time. That staff member could use the same amount of time to perform other important parts of your day to day practice mechanics, such as: calling patients back, or even greeting a patient; good old fashioned customer service. Those lost hours on the telephone could be better utilized in face to face time with clients. There are a myriad of other important tasks that could be done instead of spending time on the telephone with an insurance company.

Additionally, outsourcing is cost effective. Typically a practitioner pays the employee’s taxes, workman’s compensation, payroll, and often health benefits are paid, not to mention, payment for sick days and holidays. Training costs keep the biller or coder up to date on the latest changes in codes and regulations that change yearly. Training also comes into play with staff turnover. Office supplies and hardware can be expensive. And lastly what no one likes to think about is theft or embezzlement. Internal billing process may not provide for proper separation of revenue functions. According to the Medical Group Management Association in a survey released in November 2010, “nearly 83% of 688 practice managers were affiliated at some point with medical offices where employee theft occurred. Nearly 45% of practice managers reported cash stolen before or after it was recorded on the books.”

A billing company is generally paid per claim or at a percentage of the collected amount; usually from 4% to 8 % of net collections on a national average. Typically, there is little or no out of pocket expense for the practitioner. The difference between the expense of a full or even a part time billing employee and a good billing company should be a profit to the practice. In 2008 a report by National Healthcare Exchange Services states that physician practices are spending as much as 14% of their total revenue to ensure accurate reimbursement from health insurers.

Possibly you have staff members who have been with you for a long time. However, that person will eventually leave. Staff turnover and sick time means no claims going out and no money coming in. If you lose a staff member it can take weeks or even months for the new biller to catch up. Your income is affected. Family leave, prolonged illness and other reasons for staff members being out of the office are reasons to trust the billing company to keep the cash flow coming in at a steady pace. The practice expenses do not stop. Keeping the income flowing is important. Staff turnover is not an issue with a billing company. The billing company is there working to keep your money flowing. If the company is reimbursed on their collections, they will work hard to get you paid.

If you decide to utilize an outside billing company, do your research. Ask for references and make sure you are comfortable with them. There are online resources regarding what to look for in a billing company. Just make sure you have a contract in hand and a HIPAA compliant company. Perform due diligence and all should go well in choosing an outside billing company.